The Future of Globalization under the Impact of COVID-19 Pandemic The Future of Globalization under the Impact of COVID-19 Pandemic Fu Mengzi™ Abstract: China will continue to be an active participant and promoter of globalization. While the coronavirus epidemic may be a watershed in the process of globalization, in the post-pandemic period China will speed up its domestic circulation and prioritize regional circulation of neighboring countries. Globalization’ s pace will not halt over the long run. Rather, its renewal after the pandemic will trend in ways that meet expectations. Keywords: globalization, coronavirus, pandemic, industrial chain T™ spread of COVID-19 in 2020, a most serious global crisis, has had profound and comprehensive impacts. The world will witness shifts, changes and transitions since many countries and regions have been affected. According to the World Health Organization, by July 6 there have been more than 11,3 million coronavirus cases and over 500,000 deaths worldwide.’ A question arises as to how this crisis will affect the trend toward economic globalization. The End of Globalization? Economic globalization has improved resource allocation, the international division of labor, and human welfare. For the last five hundred years, while capitalists made use of globalization to promote economic growth, globalization characterized by marketization, liberalization and privatization has gained unprecedented momentum. The US has been a leader in globalization, but rising economies’ opening up and rapid economic development increased globalization’ s vitality. With concomitant industrial Fu Mengzi is vice president of CICIR. WHO Coronavirus Dashboard, accessed July 6, 2020, https://covid19.who. int. CIR July/August 2020 15Fu Mengzi outsourcing, wealth gap, social division, and immigration problems, some countries ost momentum in the process. Since the 2008 financial crisis, the emergence of populism, protectionism, deglobalization and anti-globalization has seen the US retreat from its globalization lead. The world is entering a time of “slowbalisation.”' With many factories closed, international travel shut down, and countries and cities suspending transport and movement, COVID-19 has severely disrupted global industrial chains and prolonged the social distancing. Many now doubt, hesitate over, or blame globalization. That the free flow of production factors in the near future could remain paralyzed and the familiar patterns of globalization might end are predictions some do make, extrapolating from the effects of the cri: Strategic elites differ in their opinions. Some, including US former secretary of state Henry Kissinger, argue that the pandemic will forever alter world order. Others assert that COVID-19 will create a world that is | world may see the demise of globalization.’ s open, less prosperous, and less free,’ that a post-coronavirus The coronavirus will directly affect globalization despite some people’ s optimism for globalization’ s positives. Without a doubt, the rhythm and the form of globalization will be different, post-crisis, The global industrial chain will see a restructure, factories will move back to their country of origin, and regional cooperation will step up. The inevitable restructuring of the global industrial chain, a natural outgrowth of globalization, will be forced by updates where international industrial division is more delicate, the technology more intensive and the cost lower, Under these circumstances, the industrial chain will be longer and larger. Where factory shutdowns and logistics control break the industry chain, it will be imperative for businesses to shorten the chain or locate it closer, with some businesses moving their outsourced factories Kate Jones, “Goodbye Globalisation, Hello Slowbalisation,” August 7, 2019, accessed July 1, 2020, httpthebalicbriefing,.comvmagazine/goodbye-globalisaton-hello-slowbalisation. > Stephen M. Walt, “Is This the End of Globalization: A World Less Prosperous, Open and Free,” Foreign Policy, March 20, 2020, accessed July 6, 2020, http:/foreignpolicy.com, Kenneth Rapoza, “The Post-Coronavirus World May Be the End of Globalization, Forbes, Mpril 3, 2020, accessed May 10, 2020, https:/vww.forbes.com/sites/kenrapoza/2020/04/03 ‘the-post-coronavirus-world-may-be-the-end-of-globalization/#22bed2de7e66, 16 CIR Vol.30 No.4The Future of Globalization under the Impact of COVID-19 Pandemic back to home country. The shortage of face masks and respiratory machines laid bare medical manufacturing’ s exposure. Reports of out-of-stock situations and tighter availability of medications for chronic diseases numbered about 600 in 2018; this had doubled to about 1,200 reports the following year, 2019. For Europe, Asian countries’ share (80%) of pharmaceutical raw materials were found to be primarily from China and India. China supplies 60% of paracetamol and 90% percent of penicillin worldwide. Almost three-fourths of facilities producing pharmaceutical ingredients for US consumption are located abroad—mostly in the European Union, India and China.' They found themselves excessively dependent on the global supply chain. To avoid overwhelming dependence on the global supply chain, the US administration has decided to cut off reliance on external supply for medical equipment to ensure medication security. The Trump administration has encouraged American overseas businesses to revive US manufacturing and bring back factory jobs. Donald Trump even orders US businesses out of China. The US and Japanese governments have promised to pay the moving costs of returning American companies. The EU has adopted local procurement politics and will reduce dependence on trade. To ensure economic sovereignty and manufacturing independence, some governments have pushed to create low-profit businesses, specifically in health, medical care and hi-tech industries. Regional cooperation matters more than globalization. Given political and security interests, a single market is not the prioritized objective for major powers despite global gambling for more economic interests. The US will decouple from its competitors, and reduce economic and financial reliance on them, to maintain hegemony. A value-oriented economic partner system is more welcome for the US. Rivalry with China is a common strategy of the two main US political parties. The pandemic and November presidential election have amplified Sino-US tension. Joseph Biden, the US vice president, 2009-2017, now a Democratic Party candidate, argues, Richard Fontaine, “Globalization Will Look Very Different after the Coronavirus Pandemic,” Foreign Policy, April 17, 2020, accessed May 10, 2020, hitps:/foreignpolicy.com 2020/04/17/globalization-trade-war-after-coronavirus-pandemic, CIR July/August 2020 "7Fu Mengzi “The United States does need to get tough with China. ....To win the competition for the future against China or anyone else, the United States must sharpen its innovative edge and unite the economic might of democracies around the world...even as we seek to cooperate with Beijing on issues where our interests converge, such as climate change, nonproliferation, and global health security.”' Meantime, China and other rising countries adhere to globalization. Some predict that there will be two systems, one each centered on the US and China. Countries will emphasize regional cooperation and guard against supply chain extension. A joint statement issued by the ASEAN+3 summit on coronavirus disease advocated Asian countries cooperate in fighting the virus, promote regional integrity, coordinate policies, and run smooth supply chains. With regional cooperation taking priority, globalization must transition. Almost every post-Cold War nation participated in global competition and cooperation once marketization, liberalization and privatization took hold because thereby they improved resource allocation, reduced production costs, joined in the international division of labor, or promoted social tion. welfare. They underwent reform or opening up to embrace global The upcoming transition of globalization will mean emphasis on how to participate in globalization, how to balance society and market, and fair competition between state-owned and private enterprises. Globalization has resulted in social divisions in countries which have become losers at globali: ion. Now, profit motive and social development should be balanced. Society and market should be coordinated. An overall plan taking into account majorities’ requirements is necessary. Most countries will benefit. Win-win cooperation will empower globalization. “At the same time, we will need to work towards eliminating problems such as social and economic disparities caused by globalization,” said Mie Oba. Otherwise, the outbreak of coronavirus will push countries affected by nationalism inward.’ Joseph R. Biden, “Why American Must Lead Again Rescuing U.S. Foreign Policy after Trump,” Foreign Affairs, March/April 2020, 71 * Mie Oba, “Coronavirus and the Future of Globalization—The Pandemic May Exacerbate an Existing Tendency for Countries to Tum Inward,” Diplomat, March 18, 2020, accessed May 10, 2020, https://thediplomat.com/2020/03/coronavirus-and-the-future-of -globalization’. 18 CIR Vol.30 No.4The Future of Globalization under the Impact of COVID-19 Pandemic The main theme of human development is competition, which requires a tolerant, fair environment. Developed countries, early proponents of fair trade, if now unwilling to allow developing countries to share benefits or reluctant to accept the developing countries’ transitional arrangements, ask a high price when demanding developing countries like China turn into developed ones. Indeed, it is inequality. Rising economies will establish new rules emphasizing the justice of international economic rules. The rule restructuring requires global consensus and the tolerance of developed countries. Otherwise, there is long-term gambling to achieve just rule in competition. The role of state-owned and private businesses in promoting economic growth should be strengthened. On the 2019 Fortune Global 500, China-based companies were a record 129, outnumbering the 121 US-based companies for the first time, and far more than the four Chinese companies listed in 1996, signaling a significant global power shift.' Chinese businesses experiencing global competition updated industrial restructuring and demonstrated innovation and vitality since China’ s accession to the WTO. In newly emerging countries, enterprises, mostly nation-owned, are growing. The West always believes nation-owned enterprises to be backed by beneficial goverment policies advantageous for their funding, tax breaks, and procurement discounts. Some claim that foreign state-owned enterprises “enjoy unfair advantages over private business” and Western private businesses are economically disadvantaged.’ For national security reasons, Western governments press against the investment of SOEs and some private businesses in competing countries. As Western countries could not abandon both state-owned and private enterprises, China could not abandon them. Western state-owned enterprises primarily operate in the domain of electric power, post services, railway, insurance, and oil; the US Alan Murray and Katherine Dunn, “China Takes Lead in Fortune Global 500: CEO Daily,” Fortune, June 22, 2019, accessed June 8, 2020, https://fortune,com/2019/07/22 Ichina-takes-lead-in-fortune-global-500-ceo-laily. ? Renato Mazzolini, “Are State Owned Enterprises Unfair Competitior Management Review, December 1, 1980, accessed June 8, 2020, hitps:/jourals. sagepub.com Hdoi/pd!10.2307/41164913. CIR July/August 2020 19Fu Mengzi Postal Service is on the Global 500. British and French state-owned enterprises’ fixed assets are far more than those of the US. Both state-owned and private enterprises are very small parts of the world economy. All the foreign companies should be treated equally. The discrimination and repression are not right approaches to develop entrepreneurial capacity, restructure the world economy and build modern economic order. SOE development, for people’ s basic living, will be encouraged and supported in many countries. China and Globalization China’ s participation in globalization was dependent on policy option and external environment. The economic blockade and threat of Western capitalist countries forced China to join the former Soviet Union bloc socialist market system and establish economic exchanges with developing countries and some developed countries for a long time after the PRC’ s establishment. In 1972, US President Richard Nixon’ s visit to China resulted in diplomatic relations between the two countries, and China established diplomatic relations with many developed countries since then. After the Third Plenary Session of the 11th Central Committee meeting in 1978 and reform and opening up, China formally joined in globalization, building special economic zones in Guangdong and Fujian to attract foreign investment. Chinese enterprises that process imported raw materials, manufacture products according to imported samples, and assemble imported parts and those enterprises that repay loans for imported equipment and technologies with products, would participate in international economic cycles and accept external industrial transfer. Moving in line with the international economy involved regionalization and globalization, Because it launched reform and opening up ten years earlier than the former Soviet Union, Eastern Europe and other developing countries, China was well-positioned for the significant opportunity within globalization. When markets unified, post-Cold War, China deeply engaged in economic globalization, Membership in WTO, corporate mergers, and restructuring accelerated Chinese business development. After the 2008 financial crisis, the West ceded the role of global trade champion as China and emerging economies led the globalization 20 CIR Vol.30 No.4The Future of Globalization under the Impact of COVID-19 Pandemic wave. As the second largest economy, China has contributed 30% of world economic growth and now is the major motivator for globalization. The coronavirus epidemic has hit China’ s economy, with growth having dropped by 6.8% in the first quarter 2020 for the first time in four decades, and a significant fall in its annual economic growth expected. Strict measures to control the coronavirus are effective for economic recovery and development. The coronavirus will not bar China from participating in globalization, nonetheless, even while the world economy encounters uncertainty and turbulence during political gambling. Since foreign trade fell as the virus spread, it will take longer than expected to rebuild global production, logistics, and value chain. The external environment of China’ s economic growth is severely affected. China’ s President Xi Jinping argues we should stick to bottom-line thinking and be well-prepared for changes in the external environment in the face of coronavirus crisis and economic fallout. China’ s priority is to ensure an unhindered cycle among industry chain, market and economic society. We should put more emphasis on regional coronavirus control and economic integration. China’ s government should further ease tariffs, eliminate barriers, boost the trade and investment flows, and keep markets open to restore growth in East Asia. China should maintain necessary people flow and logistics and stabilize the production supply chain. “We also need to work toward signing the Regional Comprehensive Economic Partnership (RCEP) agreement within the agreed time-frame, and speed up the Trilateral FTA negotiations to enhance regional economic integration,” said Premier Li Keqiang in April As the largest manufacturing and trading country, China has become the main destination of international investment. The development of “Zhonggong zhongyang zhengzhiju changwu weiyuanhui zhaokai huiyi Xi Jinping zhuchi [President Xi Jinping chairs the Standing Committee meeting of the Political Bureau of the Communist Party],” Xinhuanet, April 8, 2020, accessed May 10, 2020, http://www.xinhuanet.com/politics/leaders/2020-04/08/c_1125829634.htm. > “Li Kegiang chuxi dongmeng yu zhongrihan kangji xinguanfeiyan yiging lingdaoren tebie huiyi [Premier Li Keqiang attends special summit of Association of Southeast Asian Nations, China, Japan and the Republic of Korea (10+3) on COVID-19] vvia video link,” April 14, 2020; hitps:/inews. cgin.com/news/2020-04-14/ ASEAN-China-Iapan -ROK-special-summit-on-COVID-19-starts-PGnkYbiNP2/index. html. CIR July/August 2020 21Fu Mengzi China is inextricably linked to globalization. China offers medical equipment and sends medical personnel to many countries. China’ s return to work is good news for the economy, but difficulties cannot be eliminated soon. The shrinking market and hindered land and marine transport make it more difficult to protect, mend and build a supply chain. With substitutes of products and industry looking for new positioning, innovative industry should be encouraged. Since post-coronavirus globalization could not be restarted in a rush, step-by-step approaches in domestic, regional and global markets are going to be more effective. The Destiny of Globalization From the perspective of the overall history of world development, the basic trajectory of people’ s living, production and development is from closure to opening up, from isolation to exchange. It is too early to predict that the coronavirus outbreak will change globalization forever. Admittedly, we will witness more changes after the pandemic as people travel back to cities from their hometown or village, but it will not last forever. In the crisis, the lack of external assistance from other countries may bring humanitarian disaster from food crisis and climate change if they cannot be supported by other countries. Unless we join forces, we all remain vulnerable. Now that artificial intelligence, the Internet of things (IoT), cloud contact, internet finance and net meeting systems have expanded the scope, space and form of human interactions, there is opportunity for globalization to update. It is also too early to say that globalization will bring division and fragmentation after the crisis. An article in the Economist said, “A more nationalistic and self-sufficient era beckons. It won’ t be richer—or safer... The way to make supply chains more resilient is not to domesticate them, which concentrates risk and forfeits economies of scale, but to diversify them. Moreover, a fractured world will make solving global problems harder.”' US president Donald Trump has threatened to pull the US out of “Goodbye Globalisation—The Dangerous Lure of Self-sufficiency,” Economist, May 16, 2020, 7. 22 CIR Vol.30 No.4The Future of Globalization under the Impact of COVID-19 Pandemic WTO, WHO and the United Nations, but US allies do not support it. China, the EU and 17 other WTO members issued a joint statement to create a new international trade system, Multi-Party Interim Appeal Arbitration Arrangement (MPIA), due to the ceased functions when the US made an obstruction in the appointment of new judges in May 2020. The US has constrained Chinese companies with the excuse of national security and intensified pressure on the UK, Australia and Germany to avoid Huawei and ZTE. But the US did not receive support from its allies. An article in the Atlantic magazine pointed out that America is alone in its Cold War with China.’ That the US has started to draft rules to allow Huawei and US companies to work together on 5G standards reflects that the US has to face reality and cannot harm its own interests despite competition with China. As the coronavirus spreads, multilateralism has even accelerated its development and any single country cannot dominate the globalization. Harvard scholar Graham Allison, author of Destined for War: Can American and China Escape Thucydides’ Trap?, writes that with unipolarity over, the US will need to share the world because there are many spheres of influence.’ The evolving technology and updated rules push forward globalization. Different countries should seek common ground in a multipolar world. As the largest consumer country, China has the potential demand of a large population which will promote economic recovery and future globalization. The collective hope of the international community is to see how China’ s leadership can save globalization. In the Financial Times, the editorial board wrote that, “China should stand up to revive global demand ....Beijing could show leadership by running current account deficits.”” A French scholar said China is the only country to save globalization. It is also in line with China’ s proposal in building a Community of Shared Future for Mankind. Future globalization is a high-quality globalization, not simple Uri Friedman, “America Is Alone in Its Cold War with China,” Atlantic, February 2020, accessed June 12, 2020, https:/www. theatlantic, com/politics/archive/2020/02/us -china-alles-competition/606637 2 Graham Allison, “The New Spheres of Influence—Sharing the Globe with Other Power,” Foreign Affairs, March/April 2020, 30. » “China Should Stand up to Revive Global Demand,” Financial Times, March 29, 2020, accessed May 10, 2020, htps:/www.ft. comvcontent’ | 9ffca2-7030-1 Lea-89df4 Ibea0557206, CIR July/August 2020 23Fu Mengzi expansion, and calls for quality global governance. Some scholars are pessimistic about international cooperation, post-outbreak. Harvard University’ s Stephen Walt said, “What won’ t change is the fundamentally conflictive nature of world politics. Previous plagues—including the influenza epidemic of 1918-1919—did not end great-power rivalry nor usher in a new era of global cooperation. Neither will COVID-19.”" However, we should be committed ourselves without any concession, exclusion and malevolence for common progress. In the process of globalization and global governance, any political manipulation is like poison. Fragmentation and exclusion will undermine the interests of all parties. The coronavirus is the common enemy of humanity, What China does for controlling the virus wins time and offers more faith for other countries. China also strengthens international cooperation. President Xi Jinping outlined at the G20 Extraordinary Virtual Leaders’ Summit on COVID-19 that, “It is imperative for the international community to strengthen confidence, act with unity and work together in a collective response. We must comprehensively step up international cooperation and foster greater synergy so that humanity as one could win the battle against such a major infectious disease.... I am convinced that through solidarity and mutual assistance, we will prevail over this outbreak and we all will embrace a brighter future for mankind.”* China has made efforts to smooth the domestic and regional supply chain, which strongly supports economic recovery. As globalization makes China more closely interrelated with the outside world, China is the participator, advocator and promoter of globalization. Thanks to globalization, China’ s economy has grown rapidly, but China has also encountered shocks from international liquid capital, and experienced environmental degradation and industrial transfer. Foreign countries are discriminating against Chinese companies. We should make use of globalization but bypass its disadvantages. The pursuit of human development is openness, inclusiveness, mutual benefit and win-win Walt, “A World Less Open.” Xi Jinping, “Xieshou kangyi gongke shijian—zai ershi guo jituan lingdaoren tebie fenghui shang de fayan [Xi’s remarks at Extraordinary G20 Leaders’ Summit],” Guangming Daily, March 27, 2020. 24 CIR Vol.30 No.4The Future of Globalization under the Impact of COVID-19 Pandemic progress. China will endeavor to revive a healthy, secure, equal, mutually beneficial, coordinated globalization and build a community with a shared future for mankind. (edited by Zhang Yimeng) CIR July/August 2020 25